Can spending in order to save be an effective strategy to help you meet your financial goals?

The phrase “you’ve got to spend money to make money” is classic. In the rough waters of today’s economy, the talk is all about how to meet your financial goals, and a similar expression keeps reappearing: “you’ve got to spend money to save money.”

Succeeding with financial goals and objectives depend on an accurate appraisal of your situation.

For financial goals and objectives, is this true? For someone with debt, yes and no. To meet your financial goals, spending money to save money might make sense for non-discretionary, recurrring cost-of-living expenses. The Big Three are housing, food, and transportation to and from work. These major expenses are unavoidable, and so any strategy to reduce and eliminate debt should take them into consideration.

To meet your financial goals, start with understanding your behavior

But a major risk in adopting the “spend to save” mantra for financial goals and objectives exists: that spending money upfront as a habit can get one deeper into debt if the individual cannot control their buying behavior, and/or if the individual does not do an accurate “return on investment” analysis before splurging to save. To understand how to best meet your financial goals, take for example moving into a new home. When you initially rent an apartment, do you invest in cooking instruments, pots, and pans? For your financial goals and objectives, if you’re planning on taking the cooking gear with you even if you relocate, then you will extract value from it over the long term — provided you actually cook at home, and frequently. But for someone that has a habit of eating out and cannot be easily changed, spending a lump upfront to get a quality set of pots, pans, and cooking utensils will not make sense. If one eats out constantly, perhaps one’s behavior can be modified to stop spluring on eateries. To figure this out to meet your financial goals, an honest look at one’s behavior needs to be made.

To meet your financial goals, be honest with yourself

For financial goals and objectives, another example is buying a car. Let’s say you need a vehicle to get to and from work. To meet your financial goals you decide to buy a model with excellent gas mileage. But is purchasing a new hybrid model worth it, especially if you are planning on relocating within the next couple of years to a city where a car might be unnecessary? Or maybe your commute to and from the office is only a couple of miles. Given the typical added initial cost to owning a car with hybrid technology, maybe the miles you drive do not justify for your financial goals and objectives the most hi-tech set of wheels. Or perhaps to try and meet your financial goals you’ll end up using public transportation to get around anyways. These are all possibilities that can make buying a new car financially nonsensical, despite the chance to save slivers of money at the gas pump or averting a wear-and-tear maintenance cost.

In short, to meet your financial goals of debt reduction, if there’s a way to invest a modest amount at the outset that allows one to save signficantly again and again as time passes, then this might be helpful, provided it is coupled with clear organization, a strategy to reduce debt, and adequate financial planning and tracking. but an accurate estimate how much you spend upfront versus the value you will extract – value meaning clear amounts of money actually saved over time – needs to be done.

Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.